[Federal Register Volume 68, Number 166 (Wednesday, August 27, 2003)]
[Notices]
[Pages 51622-51624]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-21944]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48379; File No. SR-NASD-2003-109]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by 
the National Association of Securities Dealers, Inc. Relating to 
Changes in Fingerprint Processing Fees Contained in Schedule A of the 
NASD By-Laws

August 20, 2003.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on July 10, 2003, the National Association of 
Securities Dealers, Inc. (``NASD'') filed with the Securities and 
Exchange Commission (``SEC'' or ``Commission'') the proposed rule 
change as described in Items I, II, and III below, which Items have 
been prepared by NASD. On August 7, 2003, NASD filed an amendment to 
the proposal.\3\ The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Shirley H. Weiss, Associate General Counsel, 
Office of General Counsel, Regulatory Policy and Oversight, NASD, to 
Jonathan G. Katz, Secretary, Commission, dated August 6, 2003. 
(``Amendment No. 1''). In Amendment No. 1, NASD substituted in the 
first paragraph of Section I of Exhibit 1 of the filing the word 
``fingerprints'' for the phrase ``fingerprint images and identifying 
information'' to make the introductory language of Section I 
consistent with the proposed rule text. For purposes of calculating 
the 60-day abrogation period, the Commission considers the period to 
have commenced on August 7, 2003.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD is proposing to amend Section (4)(b) of Schedule A of NASD's 
By-Laws to: (1) Increase the $10.00 charge for each set of fingerprints 
submitted by a member to NASD for processing to $13.00; (2) establish a 
$13.00 charge to be paid to NASD for posting each set of fingerprint 
results and identifying information that have been processed through 
another self-regulatory organization (``SRO'') and submitted by a 
member to NASD; and (3) substitute the term ``fingerprints'' for 
``fingerprint cards.'' NASD intends for the fees to become operative on 
July 15, 2003. Below is the text of the proposed rule change. Proposed 
new language is in italics; proposed deletions are in brackets.\4\
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    \4\ At the NASD's request, the Commission made certain non-
substantive, typographical changes to the proposed rule text to make 
it consistent with the current NASD rule text. Telephone conference 
between Shirley H. Weiss, Associate General Counsel, Office of 
General Counsel, Regulatory Policy and Oversight, NASD, and 
Christopher B. Stone, Special Counsel, Division of Market 
Regulation, Commission (July 22, 2003).
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* * * * *
Schedule A to NASD By-Laws
    Assessments and fees pursuant to the provisions of Article VI of 
the By-Laws of NASD shall be determined on the following basis.
Sections 1 through 3 No change.
Section 4--Fees
    (a) No change.
    (b) NASD shall assess each member a fee of:
    (1) through (3) No change.
    (4) [$10.00] $13.00 for processing and posting to the CRD system 
each set of fingerprints [each fingerprint card] submitted by the 
member to NASD, plus any other charge that may be imposed by the United 
States Department of Justice for processing [such] each set of 
fingerprints [card; and].
    (5) $13.00 for processing and posting to the CRD system each set of 
fingerprint results and identifying information that have been 
processed through another self-regulatory organization and submitted by 
a member to NASD.
    [(5)] (6) $30.00 annually for each of the member's registered 
representatives and principals for system processing.
    [(6)] (7) 10% of a member's final annual renewal assessment or 
$100, whichever is greater, with a maximum charge of $5,000, if the 
member fails timely to pay the amount indicated on its preliminary 
renewal statement.
    (c) through (l) No change.
* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NASD included statements 
concerning the purpose of and the basis for the proposed rule change 
and discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. NASD has prepared summaries, set forth in Sections A, B, 
and C below, of the most significant aspects of such statements.

[[Page 51623]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change to Section 4(b) is to (1) 
increase the $10.00 charge for each set of fingerprints submitted by a 
member to NASD for processing to $13.00; and (2) establish a $13.00 
charge to be paid to NASD for posting each set of fingerprint results 
and identifying information processed by another SRO on the Central 
Registration Depository (``CRD'' or ``Web CRD'').
    NASD currently processes fingerprint cards submitted by member 
firms on behalf of their associated persons who are required to be 
fingerprinted pursuant to the Act. Among other things, NASD collects 
the fingerprint cards, images them, links them to an associated 
person's CRD record, and forwards them to the Federal Bureau of 
Investigation (``FBI''). NASD tracks the status of these cards and 
posts the results of the FBI's fingerprint check on the CRD system.\5\ 
NASD currently charges members $10.00 for processing each fingerprint 
card and additionally collects $22.00 from members on behalf of the FBI 
as appropriate, consistent with FBI guidelines.\6\ The $3.00 increase 
proposed in the rule change will raise NASD's fingerprint processing 
fee from $10.00 to $13.00 and, when the FBI's $22.00 fee is included, 
will raise the total fingerprint processing fee from $32.00 to $35.00. 
The additional $3.00 charge will help cover NASD costs associated with 
its fingerprinting program.
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    \5\ Generally speaking, results fall into one of three 
categories: ``clear,'' ``criminal history record information,'' or 
``illegible'' (if the FBI could not ``read'' the images submitted). 
``Criminal history record information'' (``CHRI'') is defined in 
Section 28 of the Code of Federal Regulations as ``information 
collected by criminal justice agencies on individuals consisting of 
identifiable descriptions and notations of arrests, indictments, 
informations, or other formal criminal charges, and any disposition 
arising therefrom, sentencing, correction supervision, and release. 
The term does not include identification information such as 
fingerprint records to the extent that such information does not 
indicate involvement of the individual in the criminal justice 
system.'' In general terms, CHRI is composed of the results of a 
fingerprint check on a registered or associated person when 
information received from the FBI reflects an arrest history.
    \6\ The FBI determines when and on what basis it will charge the 
$22.00 fee. For example, the FBI does not charge a fee on the 
submission of a second card when it identifies both the first and 
the second card as illegible for a particular individual.
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    The proposed rule change also establishes a new $13.00 fee to be 
charged by NASD to members that submit to NASD for posting to the CRD 
system fingerprint results and identifying information that has been 
processed through another SRO. Pursuant to Section 17(f)(2) of the Act 
\7\ and Rule 17f-2 thereunder,\8\ other SROs may process fingerprint 
cards for persons required to have their fingerprints processed through 
the FBI, consistent with fingerprint plans submitted by those SROs to 
the Commission. NASD currently accepts the results (i.e., the actual 
disposition/record sent by the FBI) of fingerprints processed through 
another SRO at no cost to the member. Consistent with Commission Rule 
17f-2(b),\9\ members may, under certain enumerated circumstances, 
submit such results in lieu of submitting fingerprint cards. Upon 
receipt of the results, NASD staff images and stores the documents 
received, verifies and matches the fingerprint processing results to an 
existing CRD record if available, and manually posts the results to the 
CRD system. In the event that the individual does not already have a 
CRD record, NASD staff would be required to create a new base record in 
the CRD system. NASD proposes charging members a $13.00 fee to perform 
these activities. Because the FBI would have already processed these 
fingerprints, the member would have already paid the FBI fee, and NASD 
would not be charging the additional FBI fee under these circumstances.
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    \7\ 15 U.S.C. 78q(f)(2).
    \8\ 17 CFR 240.17f-2.
    \9\ 17 CFR 240.17f-2(b). At the NASD's request, the Commission 
added the subparagraph (b) to the rule reference to clarify the 
``enumerated circumstances'' being referred to by the NASD. 
Telephone conference between Richard E. Pullano, Associate Vice 
President and Chief Counsel, Registration and Disclosure, NASD, 
Shirley H. Weiss, Associate General Counsel, Office of General 
Counsel, Regulatory Policy and Oversight, NASD, and Christopher B. 
Stone, Special Counsel, Division of Market Regulation, Commission 
(July 22, 2003).
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    NASD also proposes substituting the term ``set of fingerprints'' 
for ``fingerprint cards.'' This proposed change describes the 
traditional ink and paper fingerprint cards in current use, but in 
recognition of the changing technology available for fingerprint 
processing, would also describe the electronic transmission of 
fingerprints.
    The proposed fingerprint processing fees will be assessed starting 
on July 15, 2003.
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of Sections 15A(b)(5) of the Act,\10\ which requires, among 
other things, the equitable allocation of reasonable dues, fees, and 
other charges among members and issuers and other persons using any 
facility or system that NASD operates or controls. NASD believes that 
the proposed fingerprint processing fees are reasonable and fairly 
reflect NASD's costs incurred in processing fingerprints and posting 
each set of fingerprint results and identifying information processed 
by another SRO on CRD.
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    \10\ 15 U.S.C. 78o-3(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective upon filing pursuant 
to Section 19(b)(3)(A)(ii)\11\ of the Act and Rule 19b-4(f)(2) 
thereunder \12\ as establishing or changing a due, fee, or other charge 
paid solely by members of the NASD. NASD intends to implement this rule 
change on July 15, 2003. At any time within 60 days of the filing of 
such proposed rule change, the Commission may summarily abrogate such 
rule change if it appears to the Commission that such action is 
necessary or appropriate, in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of the Act.\13\
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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 17 CFR 240.19b-4(f)(2).
    \13\ See Section 19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the

[[Page 51624]]

Commission and any person, other than those that may be withheld from 
the public in accordance with the provisions of 5 U.S.C. 552, will be 
available for inspection and copying in the Commission's Public 
Reference Room. Copies of such filing will also be available for 
inspection and copying at the principal office of the NASD. All 
submissions should refer to File No. SR-NASD-2003-109 and should be 
submitted by September 17, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 03-21944 Filed 8-26-03; 8:45 am]
BILLING CODE 8010-01-P